15 June 2009
Posted in Organizing House Raffles

Win a house raffles are not new and in essence are a relatively simple concept. If it is legal to do so, in theory one can sell a property at the appraisal value by selling a fixed number of raffle tickets to the public. Once the minimum "break-even" number of tickets is sold, the winner of the raffle is handed the keys to their property prize and the homeowner is able to pay off their mortgage - and potentially even make a profit in some countries.

Of course, like most things, in practice a number of issues need to be taken into account to determine how to organize a home raffle, and whether this is the right course of action for a homeowner. In particular, it is essential to carefully consider the legal framework within which the house raffle will be organized. Each state (or country) has its own laws pertaining to gaming, lotteries and prize competitions. Likewise, there are often tax implications to consider for the winners.

At the same time, home raffles have become more popular lately, given other traditional forms of selling properties have stalled. With house prices dropping across most states, some homeowners have turned to house raffles as a way to secure the appraisal value of their home. For example, this can occur as a result of buyers not being able to secure a mortgage themselves, or due to prices having dropped too far below the homeowner's expectations.

Given it is illegal in most states to organize a house raffle for private gain, most US homeowners have turned to grassroots Non-Profit Organizations (NPOs) or charities for help. Depending on the laws of your state, a registered NPO may legally raffle off a property on your behalf. This requires setting up an agreement between the homeowner and the NPO to determine how the raffle will be organized.

If all raffle tickets are successfully sold in time (in some cases, house raffles may be extended to allow for all tickets to be sold), a winner is drawn and is awarded the home bearing no mortgage. In most states the winner is required to pay taxes on their winnings. Depending on their personal situation and the value of the property, property winners may be required to raise a new mortgage to finance this amount. However, the tax amount payable is usually lower than the mortgage one would normally require to buy a property of the same value.

In order to transfer the deeds to the property, the NPO purchases it from the homeowner at the appraisal value, which should be specified in the agreement between the two parties. Depending on conditions in the real estate market, this could be higher than the market price of the property at that time. On the flipside, unless an upwards adjustment is specified in the agreement with the NPO (and satisfies state laws), market prices may have risen over the period.

In both cases, the homeowner is able to pay off any mortgage or liens associated with the property. In return, the NPO can keep all profits made after all costs have been covered. It can use this to continue its philanthropic work in the community.

From a homeowner's perspective, partnering up with an NPO offers other benefits than simply being able to run a house raffle legally. In many cases, the NPO can help finance some of the marketing and administration costs involved, particularly if they have prior experience running such raffles. This includes the design and development of a website, marketing and legal expenses, as well as any ticket processing and closing costs.

Similarly, a NPO can usually reach out to a much wider audience, with potential players often more positively inclined to participate to support a good cause. Likewise, the homeowner can help support a project or charity they feel strongly about, often raising large amounts in the process.

Just like laws pertaining to raffles and prize competitions differ from one state to another, it is legal to run skill-based house competitions in some countries. This is due to local laws distinguishing between games of chance and competitions requiring players to demonstrate skill and judgement. For this reason, we continue to see new types of house competitions being run in other countries, particularly in Europe.

For example, one British couple in Devon successfully sold 46,000 tickets at £25 each (around $40) last year without partnering up with any local NPO. This allowed them to give "sell" their £1 million estate ($1.7 million), "Oldborough Retreat" at its appraisal value. Although they encountered legal hurdles along the way with the UK's Gambling Commission expressing concerns about the legality of the competition, it seems that this trend will continue across the pond.

Have you ever considered setting up a win a house raffle to sell your home? Are you running an NPO yourself and interested to partner up with potential homeowners in your state? Feel free to leave a comment below!

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